OPINION:ONE OF life's visionaries, the late Steve Jobs, once said: "Everyone here has the sense that right now is one of those moments when we are influencing the future." For those of us with a glass half full perspective, yesterday's Finance Bill was one of those moments.
Recent data from the Department of Finance have shown that tax revenues in January 2012 amounted to €3.67 billion which represents just over 10 per cent of the annual Budget 2012 target.
Approximately €250 million in corporation tax receipts, originally due for payment in December 2011, were not received into the Exchequer account until January but it is still a move in the right direction. Adding to all this was a pro-business Finance Bill because business creates “busyness” and that’s what is required right now.
A number of measures have been included to improve Ireland’s position on the international trading stage. Some had been highlighted in the budget. For example, a Special Assignee Relief Programme) is being introduced, providing an exemption from income tax on 30 per cent of salary between €75,000 and €500,000 for employees that are assigned for a minimum of one year and a maximum of five years.
Unfortunately, no exemption from the Universal Social Charge or social insurance has been provided. The scheme will be introduced for three years ending on December 31st, 2014.
Many have said that our growth will be export led so the introduction of Foreign Earnings Deduction to assist companies seeking to expand into emerging markets in Brazil, Russia, India, China and South Africa (Brics) is welcome. However, on the downside, the scheme is limited only to the Brics nations. The Bill’s accompanying documents hint that this may be revisited in the future.
The maximum amount of income that can be deducted under the scheme will be €35,000 per annum and will end in the 2014 tax year.
The Government paper “Strategy for the International Financial Services Industry in Ireland 2011-2016” noted that Ireland “can and will continue to develop the IFSC as an engine for growth and recovery”. This was evident in yesterday’s Bill as significant changes were brought about in this area – 21 provisions were brought about here.
Some of the highlights included the introduction of an interest deduction for financial traders on cross-border financing where the lender is resident in a country with which Ireland does not have a tax treaty. This will be of relevance to those in the corporate treasury sector.
Certain measures were brought about to add to Ireland’s status as one of the leading domiciles for UCITS funds and include amendments facilitating fund structures and eliminating tax charges on inbound or outbound mergers of funds. The leasing industry (in particular those in the aircraft leasing sector) will welcome the relief brought about for foreign tax suffered on its lease rentals.
And, the green theme developed in previous Finance Acts has been continued in this Bill by allowing certain structured finance companies to invest in “forest carbon credits” in an effort to support the “Green IFSC” initiative.
As was announced in the budget, the property sector saw some welcome change with an exemption from Capital Gains Tax being brought about for certain gains on property purchased from midnight on budget night until the end of 2013 and held for seven years. This must be balanced with the fact that from January 1st, 2015, investors in accelerated capital allowance schemes will no longer be able to use any capital allowances beyond the tax life of the particular scheme where that tax life ends after January 1st, 2015.
While not going as far as business would like on the RD credit, the changes of increased credit will be well received. In addition, companies in receipt of the RD credit have the option of using a portion of the credit to reward key employees involved in research and development.
This was a pro-growth Finance Bill. And there may be further changes before it becomes law. Fingers crossed!
Feargal ORourke is head of tax at PricewaterhouseCoopers
